While Richards Packaging Income Fund (TSE:RPI.UN) shareholders are probably generally happy, the stock hasn’t had particularly good run recently, with the share price falling 17% in the last quarter. On the other hand the returns over the last half decade have not been bad. After all, the stock has performed better than the market (55%) in that time, and is up 56%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 33% drop, in the last year.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
During five years of share price growth, Richards Packaging Income Fund actually saw its EPS drop 24% per year.
This means it’s unlikely the market is judging the company based on earnings growth. Because earnings per share don’t seem to match up with the share price, we’ll take a look at other metrics instead.
On the other hand, Richards Packaging Income Fund’s revenue is growing nicely, at a compound rate of 12% over the last five years. It’s quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling Richards Packaging Income Fund stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Richards Packaging Income Fund the TSR over the last 5 years was 85%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Richards Packaging Income Fund had a tough year, with a total loss of 31% (including dividends), against a market gain of about 11%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 13%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we’ve identified 4 warning signs for Richards Packaging Income Fund that you should be aware of.
Richards Packaging Income Fund is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.